Despite Turmoil at Ocwen, Liberty President Upbeat About Reverse Future

It’s been a rollercoaster year for Ocwen Financial Services (NYSE: OCN), as the company spent the better part of the spring and summer fighting its way out from a multi-state cease-and-desist order regarding its mortgage servicing operation.

But as RMD has reported, its reverse mortgage subsidiary, Liberty Home Equity Solutions, has remained largely insulated from the problems at the top — and now Liberty’s president says operations are full steam ahead despite the Ocwen uncertainty.

“Ocwen’s our parent, but we maintain a separate business from our parent,” Michael Kent told RMD. “We run our own business operations. We’re for all practical purposes a standalone, fully-functioning corporate entity.”

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The spring wave of enforcement actions, which generally prevented Ocwen from picking up new mortgage servicing rights, didn’t apply to Liberty except in Illinois — though officials there indicated that the reverse division was simply included as a safeguard to prevent Ocwen from skirting the law and originating forward loans through its subsidiaries. 

Liberty’s West Palm Beach, Fla.-based parent company also announced plans to completely exit the forward wholesale loan business, prompting talk about a potential outside takeover of the entire business.

Still, it’s business as usual for Liberty, with Kent telling RMD that the company is set on expanding all of its business channels — retail, wholesale, and correspondent — in the coming year.

“From the Liberty perspective, we’ve run our business the best way we see fit,” Kent said. “We continue to grow the business. We’ll continue to grow the business moving forward.”

In addition, Celink handles all of the servicing for Liberty’s reverse mortgages, putting an additional barrier between end users and Ocwen.

“If you’re one of our partners, you don’t really have any view into Ocwen, and you don’t have any interface into them,” Kent said. 

Liberty currently sits in fourth place on Reverse Market Insight’s list of top 100 lenders, with 5,170 endorsements recorded during the 12 months ended August — 1,762 retail and 3,408 wholesale — for a 5.6% market share.

Bright post-Oct. 2 future

Kent was also upbeat about the future of the Home Equity Conversion Mortgage in general, despite industry-wide concerns about new principal limit factors and mortgage insurance premiums. He pointed to the fact that borrowers will be able to retain more equity in their homes over time, but still access significant quantities of cash to supplement their retirement incomes.

In addition, he predicted greater interest in the HECM for Purchase program now that the Department of Housing and Urban Development is allowing seller concessions and instituted a more favorable timeline for obtaining new-construction certificates of occupancy.

“We’re going to have to adjust our messaging to get to the right customers,” Kent said. “But I feel very confident that our marketing team will handle that fairly easily, and there are some real upsides to these changes.”

“All in, over time, this is a much better transaction for the borrower,” Kent added.

Furthermore — echoing a sentiment expressed by others in the industry — Kent asserted that the only borrowers who will be aware of lower principal limits will be those who started the process before the deadline and weren’t able to secure a loan in time.

“If you didn’t encounter that borrower or that particular customer for the first time until October 3, you’re just going to tell them what the program is, just like you would anyone else,” Kent said.

Written by Alex Spanko

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  • Much of what Michael says about the marketplace after 10/1/2017 is nothing more than common sense with huge holes. For example, the borrower without a financial adviser or Realtor may very well not know how Mortgagee Letter 2017-12 may affect them. On the other hand, a financial adviser or Realtor who is advising them and has looked into HECMs before 10/2/2017 may have a very good idea what occurred and could very well be having second thoughts about the advisability of HECMs. Michael does not address the latter situation at all. Like many in management, those difficult situations are generally not openly or publicly addressed since they have the tendency to discourage those who have been developing these two referral sources.

    Then there are the builders. Like Realtors, their situations generally benefit from higher net principal limits over lower ones. If this referral resource is informed and has a working knowledge of HECMs, they are most likely less than enthusiastic about the changes and are questioning the viability of the product. Getting to them with the bad news earlier rather than latter at least proves your interest IN THEM understanding what the post 10/1/2017 HECM world will be like.

    Be prepared to answer the hard questions but don’t volunteer the topic unless you know upfront that the party has exposure to the HECM program dating before 10/2/2017 and has a good memory.

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